Safaricom, Airtel Face Contrasting Fortunes In Kenya

The year 2017 was, quite frankly, an exceptional one for Kenyan mobile operator Safaricom, but the same cannot be said for competitor, Airtel.

Safaricom ended the year in as dominant a position as ever in the East African country, with 72 percent of market share, putting it far ahead of nearest challenger Airtel, which stands on less than 15 percent.

Telkom Kenya has 8.4 percent. It leads its competitors in terms of mobile subscriptions, data and mobile money subscriptions.

It also continued to expand into new areas, building out its taxi-hailng app Little and launching an e-commerce platform – Masoko – in November. It also managed to face down threats to have it broken up for competition reasons, with the Communications Authority of Kenya (CA) dropping plans leaked in February to limit Safaricom’s powers.

And all this in spite of the fact that inspirational chief executive officer Bob Collymore had to take a period of time off work for health reasons.

Safaricom blowing competition away

According to Danson Njue, research analyst at Ovum, Safaricom is blowing Airtel, its historic competitor, out of the water in Kenya.

“Safaricom’s revenue and ARPU are way higher than Airtel’s. Technologically, Safaricom has a more advanced network than Airtel, having launched a commercial 4G network, whilst Airtel’s is still in the trial stage,” he said.

“Safaricom is leveraging its improved broadband connectivity to enhance its digital service offering through services such as Little and Masoko. Through these services, Safaricom has not only created new revenue streams in its operations but is also using the services as a way to attract and retain customers.”

All of this stands in stark contrast to Airtel, which in December was forced to deny reports it planned to exit East Africa due to its poor performance. The company did, however, admit it planned significant consolidation in the region.

Njue said Airtel’s relative lack of success compared to Safaricom in Kenya and the rest of East Africa was due to a combination of factors.

“In my opinion, it’s a mix of many things. First, Airtel may have hurried its entrance into the continent without clearly understanding the market. The group’s chairman has recently admitted that the group may have error in entering the African market hurriedly without first studying the needs and behaviour of the market,” he said.

He also said Airtel may have made a mistake by applying the same strategies that it had used in its other operations globally in Africa, failing to grasp that each market is unique from all others in terms of customer needs, income levels and regulatory regime, among other things.

“For instance, Airtel introduced the low-pricing strategy when it entered the continent which led to the 2010 price war across many markets in Africa,” said Njue.

“However, the strategy may have backfired as the operator neglected other aspects such as network coverage, service quality, as well as customer experience. There is also a possibility of the operators’ strategies being done at the group, which may not give individual operations a chance to participate accordingly.”

Whatever the reasons, Airtel has lagged behind Safaricom for a long time, in spite of provoking a price war, and now sits back as its rival further tempts customers with various value added services and improvements to its flagship service M-Pesa.

Njue said he believes Airtel when it says it will not exit East Africa, and agreed consolidation was a potential solution to its woes.

“Bharti Airtel has publicly stated that they will not be exiting the East African market, but will be looking for consolidations to strengthen its market position. In Rwanda, the group has recently signed an agreement with Millicom Group to acquire Tigo Rwanda. This will make Airtel the leading operator in Rwanda by market share,” he said.

Tom Jackson is co-founder of Disrupt Africa, a news and research company focused on the African tech startup ecosystem.